Seib & Wessel: Krueger on the Economic Recovery

2/15/2013 3:13PM

In an interview with WSJ's David Wessel, Council of Economic Advisers Chairman Alan Krueger talks about the improving outlook for the U.S. economy, the importance of housing and why he thinks Congress will eventually approve a rise in the minimum wage.

This transcript has been automatically generated and may not be 100% accurate.

the ... Wessel ... Wall Street Journal The Alan Krueger chairman of the president's Council of Economic Advisors ... so ... we are at a time when the economy is growing ... but it seems to be growing in a frustratingly slow pace ... why is ... well I'd ... like to see the economy healing ... that is not back to full health ... we're shaking off a lot of the damage caused by the great recession ... as result of the recession ... sixteen trillion dollars in wealth was destroyed by your half ... worth of disposable income ... no we regained thirteen and a half trillion of that ... so we've made progress ... but families are still suffering as a result of ... the drop in property values Lawson well ... job loss from the recession ... aam and was important that we stay on this path of healing ... I that we get more confidence comeback that Congress doesn't get in the way ... of the recovery ... and that we continue to add more jobs over the last three years ... we gathered over six million private sector jobs ... and that's helping ... I would like to build on the progress ... we still have ... three main ... fewer jobs so we did it to peak ... I just talked about it jobs deficit which is a wonderful phrase ... with ... a lot of people who worry that maybe there with some chronic disease here that ... were not to get better it's like having heart attacks ... he never quite feel like yourself that you think that's a possibility or do you think something better to be the ... I ... strongly feel that the B make ... the kinds of steps the president has proposed ... if we invest in the skills of American workforce ... if we ... perform our tax code ... to encourage ... more companies to locate here ... I if ... we ... make work pay ... if we do ... those types of actions and if we are responsible in ... returning to a fiscally sustainable path in bringing the deficit down in a balanced way ... then we can see a stronger recovery ... and build for a stronger ... future which ... works much better for middle-class families all have to wait how long do you think will be put forward anything resembling a full point ... I wanna give a precise forecast I can say that we're making progress ... it last year two point two million jobs were added ... so what we wanted to build on the progress and the longer that ... the expansion continues ... the more ... adjustment that will take place more healing will take place and healthier the economy will be ... when your responsibility says try to get the president some sense of what's gonna happen to the economy over the next year too ... when when you do that how important is housing in your calculation ... housing is extremely important and most recoveries ... are led by the housing sector ... the nature of the ... economic crisis that we went through however ... meant that housing was in error ... we'll rebuild homes we had an enormous housing bubble ... there are many reasons for it ... but fundamentally ... credit was too easy ... mortgages were provided that were affordable for families on expectations that prices would continue the lot ... that led builders to build more homes and if you look at it over a period of the decade ... we accumulated more homes said we needed at that time ... now we've gone through a lot of adjustment ... back in nineteen ninety eight ... the council economic advisors been a forecast ... that how many homes would be needed each year ... given our population growth given natural formally ... a family foundation ... and I'll what we see now as we just about worked off the excess ... debt so ... that what that says is that going forward ... nationwide ... we should be recovery ... in housing um ... we should be doing more home construction which is what we're seeing now their parts the country better to lag behind ... because the bubble was much worse there because it was more overbuilding there ... the national level ... I think we ... have been turning a corner housing and that's very positive ... so if housing prices continue to keep him go up ... that's good for this the economy for all the reasons you outline ... just a stop going up that would be a bit of a red flag liver problem ... I think that if home prices firm and nationwide if we continue to see growth in home prices ... that's ... very beneficial sign for the economy the families will ... feel wealthier ... bill ... I have more money to spend also will see more housing construction ... the president to say the Union talked about exports he talked about this new deal he was a straight to the Europeans ... I'm ... it seems sometimes in every country in the world is trying to get out of its economic all but exporting more to somebody else ... and to the extent that Europe is not doing very well China might be slowing down ... other parts of the globe are not growing as fast and light ... isn't really practical for us to ... increase our exports into it into a shrinking world market ... Mr. question David and I think if you look back at recent US history ... we had been underperforming ... for its exports go with another ... very successful countries like Germany would tell ... a ... bigger part of their economy exports play ... so the president initiated the national export initiative ... we have ... been an increasing our exports ... at that rate of increase has slowed because of ... weakness outside the U S but nevertheless our exports are still expanding ... and looking forward over the intermediate and long-term ... I think the US will be more even more of an export powerhouse ... a lot of the population growth ... a lot of income growth is to take place in Latin America in Asia ... and I were well positioned ... to help export to those markets ... missile that ... this question across the board spending cuts ... it ministrations been clear that think this is a bad idea it would hurt the economy ... giggles a little ... bit of the federal government and the error Hospices the council economic advisors that every big set up a big isn't ... about thirty thirty so ... what you do to get ready for the possibility that a couple weeks so be across the board spending ... well just that the general level the president has ... made ... proposals to Congress were greatly ... help us avoid the sequester the sequester is a step in the wrong direction ... for the country for the economy ... alone for my little office ... up but what we've been doing is what the other agencies across the government have been doing which is looking at our ... commitments with the other plants looking at where we can save money we would need to cut back ... spending ... under the sequester and ... frankly we have been cautious ... over the last recent weeks ... because we don't want to be in a position ... where we have to cut more deeply because we ... weren't high isn't ... that this potentially could have if Congress doesn't doesn't address the right that that that supports the view that some people have that is not really gonna make that much different suites at eighty five billion dollars over several months ... in a federal budget is three point six trillion in ... fifteen sixteen trillion dollar economy ... baby so will every agency it comes to corners and will make any difference the economy ... you don't see it that way ... oh no I think that's wrong ... I mean I think we get a taste of what impact ... that an abrupt ... drop in federal spending can have on the economy ... when the GDP numbers came after the end of last year ... Federal defense spending fell by twenty two percent in the national rate ... the reason why GDP growth was first reported as negative although ... maybe some revisions coming to that ... I was because of this abrupt drop in Federal defense spending ... the Congressional Budget Office the ... unit non ... nonpartisan overture ... of these important ... matters ... forecasts that eighty three quarter's ruling jobs to be lost ... also ... very important services that are provided to the American people ... like a head start for seventy thousand children to be scaled back ... critical research ... on topics like Alzheimer's ... I would be ... curtailed ... as some of ... these changes ... are ... in some sense irreversible ... were these hard to reverse ... the I pad defense contractors ... come tell me ... that they're very dependent on their network of small suppliers to sleep auto companies are ... if the sequester were to hit and they had to scale back ... they're worried that many of their essential suppliers will no wonder ... which means that the capacity will be lost ... that's why I was so critical of the auto rescue that the suppliers for rescue I think we could be facing a similar ... type of situation here ... Mr. one final question the minimum wage is as an academic you argue that we can raise the minimum wage ... without destroying a lot of jobs and ... is an argument about some of this in in in Europe have one strong view in an ... eye for a lot of people say that this was just a gesture by the president that ... he wanted to do something ... to appeal to the last tee favorite increase the minimum wage about twenty percent or so but that he doesn't have any intent to follow through ... Q ... any reasonably this series they might actually happen ... you look a bit the president supported increasing the minimum wage when he ran for president ... five years ago ... this is that an issue that he felt strongly about ... he stated very clearly in the state of the union that hard work should be rewarded with decent pay ... that's the something he's committed to ... his proposal to raise the minimum wage to nine dollars an hour so that ... families that work full time ... it can raise their children ... above the poverty line it's very important ... as are other steps that would provide ladders of opportunity ... to those who we forge environment ... I was on you with us ... during the Clinton ministrations present a proposal was a reaction to check out what happened ... well it's interesting that you you you ... ask it that way because ... when President Clinton ... proposed raising the minimum wage ... by ninety cents ... also that's in about twenty one percent in percentage terms nineteen eighty five to nineteen ninety five ... the reaction by some in Congress was that they would fight it with every fiber of their being ... some predicted it would cause a recession sometimes I call this recession of nineteen ninety six it didn't happen ... aam but the Congress to raise the minimum wage and I think it did so because of the country by large felt that it was the right thing to do ... it if you look at what President Obama ... has proposed ... he would raise the minimum wage back ... to where was in nineteen eighty one which adjusts for inflation ... so this is not the on the experience that we packed ... up when I was working at them the way you reply working at the minimum wage in real terms ... I he was higher than it is today ... um and they were frankly back then more opportunities from those who are from disadvantaged families so we have to ... leave it there thank you very much Alan Krueger ... Council of